Landlords - Tenants and the threat of administration

The commercial property sector continues to struggle as we move through 2013. There have been a number of high profile companies that have appointed administrators so far this year, with well known names including HMV, Blockbuster and Jessops.

With no imminent change expected in the economy it is likely that many more companies will enter administration this year. The below explains why Landlords should be on alert to signs that a commercial tenant may be on the verge of administration.

If they are requesting a change in payment terms (such as a change to monthly rent payments) or are in arrears then it would be worth the landlord carrying out some research into the financial stability of the tenant. If the landlord is really concerned that the tenant may imminently enter administration then it may be prudent to consider seizing goods before anyone else or forfeiting the lease if there is the potential to relet.

Once appointed, an administrator may want to try and force the landlord to allow a surrender of the lease. It is worth noting that an administrator does not have the power to disclaim a lease in the same way as a liquidator. Therefore landlords should not feel forced into accepting a surrender.

Landlords should also bear in mind that they are likely to be able to draw on a rent deposit should the tenant enter administration. It will depend on the exact terms of the rent deposit deed and so it would be wise to take legal advice before taking money from the deposit.

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